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More sellers selling under Seller's Stamp Duty

By Esther Hoon, Lin Zhiqin | December 18, 2015 10:43 AM MYT
Tags: Cover StorySeller's Stamp DutyParc RosewoodA Treasure TroveRipple BayReflections at Keppel BayThe MintonFour Seasons ParkGuillemard EdgeCasa Cambio
Sellers are letting go of their properties, even if they have to incur seller’s stamp duty. However, they generally wait until the SSD falls to 4% in the fourth year of purchase. Based on the latest revision of the SSD measure, homeowners who purchased their houses on or after Jan 14, 2011 and resold them within four years of the date of purchase are required to pay SSD. The SSD rates vary with the holding period, at 16%, 12%, 8% and 4% within the first, second, third and fourth years from the date of purchase respectively.



Table



Source: URA, The Edge Property



The number of sellers who paid 4% SSD grew from 200 in 2014 to 244 between January and November this year. On the other hand, only 68 sellers let go of their properties within three years of purchase in 2015, when SSD rates were hefty at between 8% and 16% (see table).

There could be several factors behind this. First, sellers might prefer to hold cash or other liquid assets in the current market so they can re-enter the market when property prices bottom.

The number of sellers who paid 4% SSD in 2014 and 2015 had purchased the properties in 2011 and 2012 and most of them netted a profit even after paying the 4% SSD.

Second, sellers who do not wish to hold on to their properties, for financial or other reasons, might do well to offload them now rather than next year, in case prices drop further. Prices of private non-landed homes have fallen an average of 1% a quarter since 3Q2013’s peak. If this trend continues or worsens, sellers might be better off incurring the 4% SSD now instead of waiting another year and risk selling their properties at lower prices as a result of a higher supply in the market.

Third, there are sellers who are forced to let go of their properties because of the soft rental environment and interest rate hikes. These properties might be sold at a loss or within the first three years of purchase. The proportion of unprofitable transactions moves in tandem with the decline in SSD rates, declining from 80% at 16% SSD rate in the first year to 22% at 4% SSD rate in the fourth year and 12% on the fifth year, when SSD is lifted (see chart).

The findings are based on matched URA’s resale and subsale caveats for private non-landed homes as at Nov 24, 2015, with their previous transactions on or after Jan 14, 2011.



Chart



Source: URA, The Edge Property



Investors pressured to offload shoebox and large units


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